Introduction to the concept of doing business as legal entity

1
Business for Engineers

• Introduction to the concept of doing business as
  legal entity

2
Introduction to Business
3
Planning your business

• Before setting up your business, you need to know
  about Malaysia economy and basic information
• Find out business registration requirement
• Get loans
• Find market information
• Find competitor and supplier
• Prepare a Business Plan
• Decide of a Business Structure

4
Malaysia Economy

• An overview

5
The GDP is expected to register a smaller overall
decline of 3.0 for 2009 and to grow between 2.0
- 3.0 in 2010
6

• The construction sector is projected to grow by
  3.2 in 2010 (2009 3.5)
• The services sector is anticipated to expand by
  3.6 in (2009 2.1)
• Services sector such as communication, finance
  and insurance, wholesale and retail trade as well
  as real estate and business services sub-sectors.
• Several niche growth areas in the services sector
  has been identified Islamic finance, healthcare
  travel, education tourism and ICT

7
Business Registration Requirement
8
Suruhanjaya Syarikat Malaysia (SSM)www.ssm.com.my

• It is also called as Companies Commission of
  Malaysia (CCM)
• SSM, established on 16 April 2002, serves as an
  agency to incorporate companies and register
  businesses.
• SSM also ensures compliance with business and
  corporate legislations through comprehensive
  enforcement and monitoring activities.
• SSM offers efficient and fast service for the
  incorporation of companies, registration of
  businesses and lodgement of statutory documents.
• SSM has nationwide presence through its
  headquarters located in Kuala Lumpur as well as
  branch offices in all the states in Malaysia.
• SSM also serves as a depository and custodian of
  corporate and business information. Such
  information is vital to enable the business
  community to make informed business decisions and
  to enable members of the public to carry out
  verifications.

9

• SSM is responsible for the administration and
  enforcement of the following legislation
• Companies Act 1965 (Act 125)
• Registration of Businesses Act 1956 (Act 197)
• Trust Companies Act 1949 (Act 100)
• Kootu Funds (Prohibition) Act 1971 (Act 28)
• any subsidiary legislation made under the Acts
  specified above such as
• Companies Regulations 1966 and
• Registration of Businesses Rules 1957.

10
Some statistics

• There are more than 600,000 registered companies
  in Malaysia and approximately 4000 foreign
  companies, majority of them are companies limited
  by shares.
• (Source Data obtained from the Companies
  Commission of Malaysia)
• These companies range from small family business
  where the directors and shareholders are family
  members, SMEs as well as large businesses with
  high business volumes and assets.
• There are over 1,000 companies listed on Bursa
  Malaysia Securities Berhad. The companies are
  publicly traded and public investors can buy and
  sell shares on the Malaysia stock exchange.

11
Loans

• Financial instituition

12
Commercial banks

• There are nine licensed commercial banks
  operating in Malaysia.
• There are also thirteen foreign banks that have
  established representative offices in Malaysia,
  but they are not permitted to conduct normal
  banking business.
• Commercial banks are also authorised to deal in
  foreign exchange and are the only financial
  institutions allowed to provide current account
  facilities.
• In addition to offering normal banking services,
  commercial banks may accept deposits denominated
  in foreign currencies from non-residents, loan
  foreign currencies to residents or syndicate such
  loans for productive purposes or for the purchase
  of Malaysian assets owned by non-residents.

13
Example of Commercial banks

• Local

• Foreign

• RHB Bank Berhad
• Public Bank Berhad
• Malayan Banking Berhad
• Hong Leong Bank Berhad
• EON Bank Berhad
• CIMB Bank Berhad
• AmBank (M) Berhad
• Alliance Bank Malaysia Berhad
• Affin Bank Berhad

• United Overseas Bank (Malaysia) Bhd.
• J.P. Morgan Chase Bank Berhad
• The Bank of Nova Scotia Berhad
•  Standard Chartered Bank Malaysia Berhad
• OCBC Bank (Malaysia) Berhad
• HSBC Bank Malaysia Berhad
• Deutsche Bank (Malaysia) Berhad
• Citibank Berhad
• Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad
• Bank of China (Malaysia) Berhad
• Bangkok Bank Berhad
• The Royal Bank of Scotland Berhad

14
Investment Banks (Ibs)

• Investment banks differ from commercial banks,
  which mainly take deposits and make commercial
  and retail loans.
• Investment banks engage mainly in public and
  private market transactions for corporations,
  governments and investors.
• These transactions include mergers and
  acquisitions (M A), investitures and issuance
  of equity and debt securities.
• Investment banks also advise and assist clients
  with specialised industry expertise (such as
  technology and real estate).
• They also do securities businesses such as
  trading, securitisation, financial engineering,
  merchant banking, funding, investment,
  management and securities services.

15
Example of Investment Banks (Local)

1. Affin Investment Bank Berhad
2. Alliance Investment Bank Berhad
3. AmInvestment Bank Berhad
4. CIMB Investment Bank Berhad
5. ECM Libra Investment Bank Berhad
6. Hong Leong Investment Bank Berhad
7. Hwang-DBS Investment Bank Berhad
8. KAF Investment Bank Berhad
9. Kenanga Investment Bank Berhad
10. Maybank Investment Bank Berhad
11. MIDF Amanah Investment Bank Berhad
12. MIMB Investment Bank Berhad
13. OSK Investment Bank Berhad
14. Public Investment Bank Berhad
15. RHB Investment Bank Berhad

16
Development Financial Institutions

• The development financial institutions are
  government agencies specialising in the provision
  of medium and long-term loans to finance capital
  investments of new industries as well as
  entrepreneurs in the industrial sector.
• The six Development Financial Institutions are
• Bank Pembangunan Malaysia
• Bank Perusahaan Kecil Sederhana Malaysia (SME
  bank)
• Export Import Bank of Malaysia Berhad
• Bank Kerjasama Rakyat Malaysia
• Bank Simpanan Nasional
• Agrobank (formerly known as Bank Pertanian
  Malaysia)

17
Development Financial Institutions (cont)

• Other Development Financial Institutions
• Malaysian Industrial Development Finance Berhad
  (MIDF)
• Credit Guarantee Corporation Malaysia Berhad
  (CGC)
• Lembaga Tabung Haji
• Sabah Development Bank Berhad
• Sabah Credit Corporation Berhad
• MIDF was formed as a joint venture between the
  government and the private sector to provide
  medium and long-term finance for the
  manufacturing industry.
• The other development banks provide loans to
  meet the credit needs of the industrial and the
  agriculture sectors respectively.

18
Market Analysis Market Strategy
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Market Analysis (example Contractor company)
Market Analysis Market Analysis Market Analysis Market Analysis Market Analysis Market Analysis Market Analysis
2004 2005 2006 2007 2008
Potential Customers Growth
Office building construction 6 2,517 2,668 2,828 2,998 3,178
Restaurant construction 3 1,779 1,832 1,887 1,944 2,002
Special facilities construction 3 2,750 2,833 2,917 3,005 3,095
General construction 2 3,264 3,329 3,396 3,464 3,533
Total 3.45 10,310 10,662 11,028 11,411 11,808
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Market Analysis (cont)

• Target Market Segment Strategy
• What you plan to accommodate your clients
• Example a well established and expeditious
  permitting program, strict cost accounting and
  supply management, and intensive and
  comprehensive project management
• Business Analysis
• Business growth for the past years
• The Advantage to your company
• current contractor companies in your proposed
  area
• Why the proposed area still in need of your
  company
• Competition and Buying Patterns
• Identify competitors in the proposed area
• Supply and demand in the proposed area

21
Business Structure/Company Ownership
22
Business Structure

• In Malaysia, the most common types of businesses
  are
• Sole proprietorships
• Partnerships
• Companies

23
Sole proprietorships (under companies act 1965)

• usually have just one business owner, and only
  Malaysian citizens or permanent residents can
  register.
• Personal names or trade names can be used as
  business names, and the Application of Business
  Name form must be filled in before a business can
  be registered.

24
Partnerships (under companies act 1965)

• comprise two or more business partners pooling
  their resources in a business with a view to
  profit.
• Like sole proprietorships, only Malaysian
  citizens or permanent residents can register
  partnerships.
• A partnership agreement is usually drawn up by
  legal counsel, which outlines the
  responsibilities of each partner, conditions of
  termination and means of resolving intra-partner
  disputes.

25
Companies (under companies act 1965)

• The most common type of company in Malaysia is a
  company limited by shares (public limited and
  private limited companies).
• Private limited companies cannot sell shares to
  the public, and are distinguished by the
  appellation "Sendirian Berhad", shortened to "Sdn
  Bhd" or "S/B".
• Public limited companies source their capital by
  selling shares to the public, and are
  distinguished by the appellation "Berhad",
  shortened to "Bhd".
• Most common company structure in Malaysia is
  (Sdn. Bhd).

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Companies (cont)

• a private limited company is limited to 50
  members (public limited companies have no member
  limit).
• This form of company can have foreign directors
  but at least 2 of the directors need to be
  principally residing in Malaysia and it can be
  100 foreign owned for industries such as the
  manufacturing, trading, and information
  technology sector.
• A minimum paid-up capital of only RM2 is needed
  to start a private limited company, while public
  limited companies need a paid-up capital of not
  less than RM60mil (if it seeks to be listed on
  the Kuala Lumpur Stock Exchange Main Board) or
  not less than RM40mil (if it seeks to be listed
  on the KLSE Second Board).

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Government Agencies to assist Entreprenuer

• Various Development programme

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Government Agencies for Entreprenuer

• To assist and guide new and existing
  entrepreneurs in planning their business, the
  following Government agencies have established
  various development programmes
• Malaysian Entrepreneurship Development Centre
  (MEDEC)
• Small-and-Medium Enterprises (SME) Development
  Programme by SMIDEC
• MSC Technopreneur Development
• Bahagian Latihan Keusahawanan, Kementerian
  Pembangunan Usahawan dan Koperasi
• MARA Entrepreneurial Development
• Bahagian Pembangunan Usahawan, Kementerian Kerja
  Raya
• Pejabat MARA Negeri
• Pusat Bimbingan Usahawan

29
Business Plan
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Introduction to Business Plan

• A Business Plan is a document that underlines in
  details the important elements of a business that
  cover initial plan, market study, capital needs,
  marketing strategies, sales and profit projection
  and so on.
• Apart from recording all the key information in
  one place for future reference, a business plan
  is also needed when an entrepreneur plans to
  obtain financial help from financial institutions
  when the need to expand the business arises.

31
Business Plan the purpose

• the use of a business plan, are
• To allow the entrepreneur evaluate and assess his
  or her business viability from various aspects,
  especially the technical and financial parts
• To become a blueprint, or guide after the
  business is successfully launched
• To study the market condition, trend and
  competition, and conclude if the business will
  have a good prospect to prosper, or otherwise
• To be used during negotiation with financial
  bodies, in order to obtain loan or expansion
  capital

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What you need to have in your Business Plan

• 1. Content page
• Outline the topics and segments of your Business
  Plan so that you (or the reader) will have an
  easy access to different scopes of the Business
  Plan.
• Each topic in the Business Plan must be written
  in such a way that the reader can skip any part
  of the earlier section and come back to it later.
• 2. Executive summary/synopsis introduction
• Explain, in summary, about the business you are
  planning to venture, and what are the important
  elements the reader can discover from reading
  your business plan.
• Name the company, type of business,
  products/services offered concisely.

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Content in Business Plan

• 3. The purpose of the business plan
• State clearly the purpose of the business plan
  writing.
• Is it a submission for financial loan from
  specific institution?
• Is it a plan for a start up operation, or an
  expansion plan for an existing business?
• Is it a blueprint or a plan for the
  entrepreneurs future reference? Or
• Is there any other objectives?
• 4. Company (owner) profile/background
• This is where the details of the company profile
  and background are discussed.
• Where is the business based on and operating?
• Who is the contact person and where are the other
  contact/corresponding details?
• How long has the company been operating?
• Is the company a sole propriety, partnership or a
  limited liability (Sdn Bhd)?
• Take note that there are differences in those 3
  types of business/company structure.
• What is the companys registration number?
• What is the total paid capital?
• List down the shareholders/owners of the company,
  including the details covering full name,
  telephone number, academic qualification and
  experience

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Content in Business Plan

• 5. Management and organizational structure
• What is the companys vision and mission?
• Who are in the management team and what are the
  qualification and credentials?
• How is the organizational structure of the
  company?
• List down the key person who will be handling
  different scope of work e.g. operation,
  marketing, finance, sales and so on.
• State the salary and remuneration package for
  each employee involved, if any.

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Content in Business Plan

• 6. Marketing plans and strategies
• A very important aspect of a Business Plan.
• In fact, many loans are rejected due to lack of
  effective marketing plans and strategies in the
  Business plan.
• Embark on a very detailed analysis of the market
  condition so that you will be able to make
  accurate and sensible sales projection.
• A good Business Plan will take account the
  aspects of products/services to be offered
  prospects and customers, benefits and advantages,
  ease of availability, location, advertising
  promotion and competition.
• How does your product differ from what is
  currently being offered in the market?
• Is it the same?
• Are you selling your product at a competitive
  price, lower price, or higher price?
• What about the distribution and supply chain
  element?
• Are you appointing authorized dealers and agents,
  or you will be selling directly to the customers?
  
• What are the medium of advertising promotion
  you will be using distributing flyers,
  internet, newspaper, radio, television and so on
  (do not overlook the cost associated with each of
  the promotional method)?

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Content in Business Plan

• 7. Operation/production plan
• If your business is product-based, how many
  quantities you will be producing in, lets say, 1
  month?
• If the product will undergo a manufacturing
  cycle, draw a clear flow diagram or chart of the
  complete process for the readers to see.
• How does the inventory works?
• How is the maintenance of the machinery is
  carried out?
• 8. Financial plan
• Also another critical aspect of a Business Plan,
  as to ensure that the figures and numbers of your
  cost, sales, revenue, profit and others are
  realistic. The financial plan consist of the
  following aspect
• Cost and capital expenditure
• Financial sources e.g. your own contribution,
  bank loan, hire purchase etc
• Cash flow analysis monthly, yearly, 3 years and
  so on
• Income statement yearly, 3 years and so on
• Break even analysis how long your business will
  be operating before covering all the cost
  incurred during the start up
• Click here for sample of business plan

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Starting your Bussiness

• Regulatory Agencies concerned with business
  operation
• Business location and site
• regulatory and record keeping requirement
  (taxation)
• book keeping and accounting system

38
Regulatory Agencies concerned with business
operation

• MITI(Matrade, MIDA, smidec)
• Securities Commission
• Local Government Authorities
• Factories and Machinery Department
• Ministry of Science, Technology and Innovation

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Ministry of International Trade and Industry
(MITI)

• MITI deals with foreign investments and promotion
  thereof and has overall responsibility for all
  aspects of foreign trade and industrial
  development.
• MITI acts through MATRADE, MIDA and SMIDEC
• i. Malaysian External Trade Development
  Corporation (MATRADE)
• MATRADE was established since March 1, 1993 as
  the external trade promotion arm of Malaysias
  MITI.
• MATRADE functions as a focal point for Malaysian
  exporters and foreign importers to source for
  trade related information.

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MITI (continue)

• ii. Malaysian Industrial Development Authority
  (MIDA)
• MIDA controls the promotion and co-ordination of
  all industrial activities.
• It advises MITI on the formulation and
  implementation of various industrial development
  policies, strategies and incentives for industry
  and on other matters concerning accelerated
  industrial development.
• MIDA issues manufacturing licences, which are
  required under ICA and gives approval on various
  incentives.
• iii. Small and Medium Industries Development
  Corporation (SMIDEC)
• SMIDEC was established on May 2, 1996.
• The establishment of SMIDEC was in recognition of
  the need for a specialised agency to further
  promote the development of Small and Medium
  Industries (SMIs) in the manufacturing sector.

41
Securities Commission (SC)

• This is a statutory body, set up under the
  Securities Commission Act 1993 to ensure the
  orderly and efficient development of the
  Malaysian securities market for the purpose of
  national economic development.
• SC's primary role is to advise the Minister of
  Finance on all matters relating to the securities
  and futures contract industries.
• It is also to safeguard the public's and
  minorities' interest, as well as to maintain
  market integrity and efficiency.

42
Local Government Authorities

• These authorities are responsible for local
  by-laws that affect business operations.
• Such laws relate mainly to buildings and
  structures (business premises), health, public
  safety and security, and displays (signboards,
  advertisement hoarding (i.e., billboards), etc.)

43
Local Government - Licenses and Permits

• Business licenses and permits are issued by the
  relevant ministries and local authorities.
• Licence and Permit By Local Authorities (Majlis
  Daerah, Majlis Perbandaran etc)
• Komposit Perniagaan, Permohonan Lesen Anjing,
  Permohonan Lesen Hiburan Dan Tempat hiburan,
  Permohonan Lesen Hiburan Video / Snooker
  ,Permohonan Lesen Iklan Sementara, Permohonan
  Lesen Penjaja, Permohonan Lesen Perniagaan,
  Sementara Permohonan Tukar Milik Lesen

44
Factories and Machinery Department

• Approval from this department is required before
  manufacturing operations may begin

45
Ministry of Science, Technology and Innovation
(MOSTI)

• This Ministry has responsibility for the
  administration of the Environmental Quality Act
  and ensures that factories are equipped with
  appropriate anti-pollution controls.

46
Other Government Agencies

• Various other government agencies regulate
  specific industries, such as
• Inland revenue malaysia (LHDN)
• finance and banking,
• insurance,
• real estate,
• petroleum, etc.

47
Malaysian Law and Legislation concerned with
Business

• Employment law

48
Employment Law - Rights and Liabilities

• The main body of employment is Malaysia is found
  in three principal legislation and subsidiary
  legislation. They are -
• Employment Act, 1955
• Industrial Relations Act, 1967
• Trade Unions Act, 1959
• The employers in Malaysia also need to bear in
  mind the relevant legislations -
• Employees Provident Fund Act, 1991
• Employees Social Security Act, 1969
• Worksmens Compensation Act, 1952
• Workers Minimum Standards of Housing and
  Amenities Act, 1990
• Wages Council Act, 1947
• Children and Young Persons (Employment) Act, 1966
• Occupational Safety and Health Act, 1994
• Human Resources Development Act, 1992

49
Employment Act 1955

• The Employment Act 1955 is the legislation
  regulating the terms and conditions of employment
  of any person, irrespective of his occupation,
  who has entered into a contract of service with
  an employer under which such person's wages do
  not exceed RM1,500 a month. Among other things it
  sets out the minimum conditions of employment
  which include
• A contract of service engaging a person may be
  written or oral, expressed or implied, specifying
  the period of notice required to terminate it
• Wages earned must be paid not later than the
  seventh day after the last day of any wage
  period

50
Employment Act 1955

• Female workers are not permitted to work in any
  industrial or agricultural undertakings between
  the hours of ten in the evening and five in the
  morning. An application can however be made to
  waive the restriction
• Ten paid gazetted public holidays in any one
  calendar year
• Eight days of paid annual leave for employees
  with less than two years of service, twelve days
  of paid annual leave for those employees with two
  or more years of service but less than five years
  of service, and sixteen days for those with over
  five years of service

51
Employment Act 1955

• Fourteen to twenty-two days sick leave in a year
  depending on length of service and where
  hospitalisation is necessary, up to an aggregate
  of sixty days sick leave in each year
• Normal hours of work shall not exceed eight hours
  a day or forty-eight hours a week
• Payment for overtime work is at a minimum of one
  and a half times the hourly rate of pay on normal
  working days, two times his hourly rate on rest
  days and three times his hourly rate on public
  holidays
• Paid maternity leave for female employees on
  maternity leave for sixty days.

52
Employees Provident Fund Act 1951 (EPF)

• The Employees Provident Fund Act 1951 provides
  for a compulsory contributory provident fund
  which is payable to employees in full on reaching
  the age of 55 years.
• All employers and employees are required to
  contribute to EPF at the rates of 12 and 11
  respectively of the employees' monthly wages.
• Among the categories of employees precluded from
  compulsory contributions are
• Expatriates employees
• Domestic servants - Persons who are employed to
  work in or connected with work in a private
  dwelling house including a valet, gardener, and
  who are paid from the private account of the
  employers.
• However, expatriate employees, domestic servants
  and self-employed persons can elect to contribute
  to the EPF.

53
Employees' Social Security Act 1969

• The Social Security Organisation (SOCSO)
  administers the Employment Injury Insurance
  Scheme and the Invalidity Pension Scheme, as
  provided for under the Employees' Social Security
  Act 1969.
• All establishments, including factories,
  employing workers earning wages not exceeding RM
  3,000 a month, are required to insure their
  workers under the two social security schemes.
• The Employment Injury Insurance Scheme provides
  employees with coverage in the event of any
  disablement or death due to employment injury by
  way of cash benefits and medical care. The
  contribution is borne solely by the employer and
  is about 1.25 of the wages of an employee.
• The Invalidity Pension Scheme provides a 24-hour
  coverage to employees against invalidity and
  death due to any cause before the age of 55
  years. The total contribution is about 1 of the
  wages and is shared by the employer and the
  employee equally.

54
Human Resource Development Fund Act 1992

• The Human Resources Development Act, 1992 which
  was enforced in January 1993 led to the
  establishment of the Human Resources Development
  Fund (HRDF) and administered by the Human
  Resources Development Council (HRDC). In line
  with the corporatisation exercise via the
  Pembangunan Sumber Manusia Berhad Act, 2001, the
  HRDC is now known as Pembangunan Sumber Manusia
  Berhad (PSMB).
• The HRDF operates on the basis of a levy/grant
  system. Employers who have paid the levy will
  qualify for training grants from the fund to
  defray or subsidise training costs for their
  Malaysian employees.

55
Workmens Compensation Act 1952

• An Act to provide for the payment of compensation
  benefits to a foreign worker who
• possesses valid employment document for injuries
  sustained due to accident which arises
• out of or in the course of employment or if death
  results from he accident, to the
• dependents.

56
Occupational Safety and Health Act 1994

• An Act to make further provisions for securing
  the safety, health and welfare of persons at
  work, for protecting others against risks to
  safety or health in connection with the
  activities of persons at work, to establish the
  National Council for Occupational Safety and
  Health, and for matters connected therewith.

57
Managing Your Business

• Human resource
• Taxation
• Accounting and auditing needs
• Standards and accreditation
• arbitration

58
Human Resources Management

• Labour Laws and Employment Guide
• As an employer, you should be aware of the rules
  and guidelines for hiring and recruiting an
  employee for your company.
• Employment Act 1955 A Guide To Malaysian Labour
  Laws
• Workmens Compensation
• Children and Young Persons (Employment) Act 1966
  (Revised 1988)
• Occupational Safety and Health Act 1994
• Discontinuing an Employee Services
• how to discontinue your employees service within
  the boundaries of the law
• Guidelines on the Implementation of Retrenchment
  , Employee Service/Contract Termination
• Benefits and Contributions
• Maternity Leave Benefits, Rest Days and Public
  Holidays, Employees Provident Fund, Social
  Security Organisation
• Employment of Foreign Workers and Expatriate
  Personnel
• There are guidelines and procedures that you have
  to follow when hiring a foreign worker and
  expatriate personnel. The Immigration Department
  of Malaysia is the government agency that
  provides services for the application process of
  employment of expatriate personnel and foreign
  workers in Malaysia.

59
Taxation

• All income of accrued in, derived from or
  remitted to Malaysia, are liable to tax.
• However, income derived from outside Malaysia and
  remitted to Malaysia by resident companies
  (except those involved in the banking, insurance,
  air and sea transportation business),
  non-resident companies and non-resident
  individuals are exempted from tax
• The Inland Revenue Board Malaysia (LHDN) act as
  an agent to provide services in assessing,
  administering, collecting and enforcing the
  payment of income tax and other taxes that are
  under the board's jurisdiction.

60
Taxation (cont)

• It is the duty of every person carrying on a
  business to keep proper books and prepare regular
  accounts.
• It is also essential to meet the requirements of
  Section 82 of the Income Tax Act, 1967 and also,
  in the case of limited companies, to meet the
  requirements of the Companies Act, 1965
• Malaysian laws are governed by statutes and the
  other principal statute that all businesses have
  to comply with is the Income Tax Act, 1967.

61
Growing Your Business

• Add a new location for your business
• Hire more employees
• Find market information
• Register as a state vendor
• Getting started in international trade
• Take Over and Mergers